Interactive Voice Response (IVR) has come a long way over the years. What started out as simple systems for banks and airlines to provide after-hours touchtone access to routine requests is expected to grow into a nearly $3 billion market by 2017, handling billions of calls across various channels and market segments each year. Yet, as frustrating as some IVR experiences are, with their menu mazes and robotic voices, they provide great value to businesses and consumers alike, allowing companies to reduce customer service costs while sparing consumers the aggravation of waiting on hold.

Today we’re seeing a new generation of IVR applications, a generation of great self-service applications that are being driven by two factors:

An economic climate that has increased the need to grow customer loyalty

The availability of secure, reliable, hosted IVR technologies.

Retaining customers and generating loyalty is top of mind for today’s business leaders. According to a study by Temkin Group, companies that are customer experience leaders enjoy at least a 16 percentage point advantage over customer experience laggards in key loyalty areas such as the willingness of consumers to buy more products, the reluctance of consumers to switch business away, and the likelihood of consumers to recommend them to friends and colleagues. Because loyalty directly relates to customer experience, it’s an important consideration for evolving IVR services. A Harvard Business Review Study shows that the key to retaining customers depends on providing a service experience that reduces customers’ perceived effort.

Customer effort within the IVR can be reduced by integrating an assortment of self-service technologies that are geared to save time and effort for callers. For example, Natural Language Understanding technology (think Siri) captures and understands callers speaking their request naturally, using their own words. With natural language understanding, the caller is not constrained by a series of menu choices and is freed from the effort of trying to match their needs to the expressed menu choices. In this way, natural language understanding can significantly reduce the callers’ effort and increase loyalty. Interestingly, it also benefits the bottom line by decreasing agent misroutes, supporting faster call handing, and even delivering increased self-service performance.

Voice biometrics is another technology that reduces effort for callers by using a customer’s voice to authenticate them rather than a password. Voice biometrics eliminates the need for customers to memorize password strings or ever have to change a password. They’re simply authenticated by matching their voice to the voiceprint that is on file. Biometrics can actually add a level of security. Hosted IVR platforms provide the innovative technologies and the expertise to deliver these convenient, personalized experiences.

As smart companies strive to improve their customer service, IVR systems actually have become more friendly and productive for callers. Fewer and fewer present labyrinths of menus with no option to talk with a live person. Instead, they’re designed specifically to get callers to the right service option fast. When calls are transferred to agents, many also transfer the IVR information provided by the caller, saving time and the frustration of repeating information. Hundreds now have natural language understanding, use speech recognition and even voice biometrics. Some systems use sophisticated prompts and text-to-speech technologies so that the system sounds so natural you forget you’re speaking to a computer.

As IVRs have become simpler and friendlier for callers, they’ve simultaneously become more complex for IT organizations to build and maintain. The technologies that provide a great caller experience – speech recognition, text-to-speech, computer telephony integration (CTI), natural language understanding, voice biometrics, plus a whole lot more – are vital for delivering the convenient phone self-service that today’s consumer has grown to expect. Not only must every technology component be integrated into a single harmonized system, but also monitored, maintained, and tuned to ensure optimal usage. The efforts required to keep all this continuously up-to-date has become a daunting and expensive struggle.

Today, there’s relief. Organizations are finding that hosted IVR is an effective way to deliver a premium caller experience while virtually eliminating the operational burden and complexity. Each year nearly 14 percent make the decision to outsource the headaches associated with operating their IVR – opting for an IVR-hosted model instead. With hosted IVR, the chosen hosting vendor maintains all of the advanced technologies and provides a service via a cloud-based (or hosted) delivery model. This model is becoming increasing popular, with analysts projecting that by 2013, hosted IVR purchases will surpass on-premises IVR purchases.

In addition to easing complexity and lowering the IVR operating expense, there’s strategic value for companies that migrate to hosted IVR. Hosted IVR vendors ensure that their systems deliver the latest and greatest solutions – always. They provide a continuously improving customer service ecosystem that helps companies provide the best self-service experience regardless of where the interaction begins; phone, web, or mobile. Hosted IVR vendors help to drive a company’s goals and vision for delivering, measuring, and managing self-service excellence – making the hosted IVR the place to go for delivering the highest levels of customer service.